New Challenges to Running a Customs Brokerage Operation Presented by: Lenny Feldman, Esq

© 2015 Sandler, Travis & Rosenberg, P.A. All rights reserved. Lenny Feldman, Esq. Managing Member - Miami Office S ANDLER, T RAVIS & R OSENBERG, P.A Presenter 2

© 2015 Sandler, Travis & Rosenberg, P.A. All rights reserved. 3 All materials contained in this presentation are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written approval of Sandler, Travis & Rosenberg, P.A. You may not alter or remove any trademark, copyright or other notice from copies of the content. The materials contained in this presentation are provided for informational use only and should not be considered legal advice. The hiring of a lawyer is an important decision that should not be based solely on advertisements or seminar/ webinar materials. Before you decide, contact us and we will send you free written information about our qualifications and experience. © Sandler, Travis & Rosenberg, P.A. All Rights Reserved. Disclaimer

© 2015 Sandler, Travis & Rosenberg, P.A. All rights reserved. The World on Your Shoulders? Atlas was permitted the opinion that he was at liberty, if he wishes, to drop the Earth and creep away; but this opinion was all that he was permitted. Franz Kafka

© 2015 Sandler, Travis & Rosenberg, P.A. All rights reserved. Trade Transformation Initiatives 5 Automated Commercial Environment Centers of Excellence & Expertise Simplified Entry Role of Broker Trade Intelligence Trade Partnerships One Govt at the Border

© 2015 Sandler, Travis & Rosenberg, P.A. All rights reserved. Challenges vs. Opportunities Core Compliance – classification, value, origin, preference Compliance Reviews, Audits & Procedures – FAs, QRAs, Audits & Manuals Security Programs – CTPAT, TSA Other Government Agencies Export Controls – Census, BIS, DDTC, OFAC Operational – licensing, warehousing, recordkeeping Educational/Instructional Services

© 2015 Sandler, Travis & Rosenberg, P.A. All rights reserved. Representations “save money, become more efficient and achieve regulatory compliance” “enhance your firm’s compliance with Customs, which can lead to faster releases…and a reduction in risk of penalties and fines.” “help you prepare for Customs audits, train personnel, define policies and procedures” “address the intricacies of trade regulations” “revamp…cargo securities procedures for … personnel, facilities and supply chain partners in order to become [C-TPAT] certified” “innovative technological processes”

© 2015 Sandler, Travis & Rosenberg, P.A. All rights reserved. Importer of record or authorized agent with reasonable care will...make entry by filing documentation and/or information necessary to enable CBP to decide release and... complete entry by filing declared value, classification and duty rate applicable to merchandise.... Broker vs. Importer Standard of Care 8

© 2015 Sandler, Travis & Rosenberg, P.A. All rights reserved. "In meeting the 'reasonable care' standard... an importer should consider: 1.pre-importation or formal rulings from Customs; 2. consulting with a Customs broker, a Customs consultant, or a public accountant or an attorney; 3. in-house employees such as counsel, a Customs administrator, or a corporate controller, with experience and knowledge of customs laws, regulations, and procedures; and 4. when appropriate, analyses from accredited labs and gaugers for determining technical qualities of an imported product." Mod Act - Legislative History

© 2015 Sandler, Travis & Rosenberg, P.A. All rights reserved. A broker must exercise responsible supervision and control over the customs business it conducts. The supervision and control should ensure that the employee provides substantially the same quality of service in handling customs transactions that the licensed broker is required to provide. The determination of what is necessary to perform and maintain responsible supervision and control will vary depending on the circumstances in each instance. Responsible Supervision and Control 19 CFR Part 111

© 2015 Sandler, Travis & Rosenberg, P.A. All rights reserved. Responsible Supervision & Control: Factors Factors include, but are not limited to:  Frequency of visits to the office by the licensed broker;  Training required of employees;  Issuance of written instructions and guidelines to the employees;  Volume and type of business of the licensee;  Reject rate for the various customs transactions;  Maintenance of current editions of customs reference materials;  Availability of the licensed broker for consultation with the employees;  Frequency of audits and reviews by the licensed broker; and  Other circumstances that demonstrate the licensed broker's interest in the operation.

© 2015 Sandler, Travis & Rosenberg, P.A. All rights reserved. Role of Broker vs. Importer 12 BrokerImporter Legal StandardResponsible Supervision & Control Reasonable Care ResponsibilityFile Entry and Obtain all Necessary Documentation and Data Provide all Necessary Documentation and Data OperationsLocal Permit RequiredNo Restrictions Continuing EducationTo Be RequiredNot Required Bona FidesBased on Power of Attorney and Broker’s Discretion Provide Power of Attorney Potential Penalties$30,000 LimitBased on Loss of Revenue or Value of Goods. No Limit.

© 2015 Sandler, Travis & Rosenberg, P.A. All rights reserved. Census: 15 CFR §30.1 Authorized agent. An individual or legal entity... in the United States that has obtained power of attorney or written authorization from a USPPI or FPPI to act on its behalf... and... to complete and file the EEI. 15 CFR §30.3(b)(3) Authorized agent. The agent shall be authorized by the USPPI or... by the FPPI to prepare and file the EEI. In a routed export transaction, the authorized agent can be the “exporter” for export control purposes. Shipper - Forwarder Relationship 13

© 2015 Sandler, Travis & Rosenberg, P.A. All rights reserved. BIS: “Forwarding agents have compliance responsibilities under the Export Administration Regulations (EAR) even when their actions are dependent upon information or instructions given by those who use their services. However, hiring an agent, whether a freight forwarder or some other agent, to perform various tasks, does not relieve a party of its compliance responsibilities.” Shipper – Forwarder Relationship 14

© 2015 Sandler, Travis & Rosenberg, P.A. All rights reserved. Forwarding agents are responsible for— Representations made in EEI filings. Suspending a transaction if knowledge that a violation is about to or is intended to occur. Export screening (i.e., RPL, embargoed/sanctioned country, “red flags”). Ensuring recordkeeping compliance. Implementing a formal internal compliance program. Filing voluntary self-disclosures when necessary. FFs as well as their customers may be subject to civil and/or criminal penalties for violations. BIS Guidance 15

© 2015 Sandler, Travis & Rosenberg, P.A. All rights reserved. What are the Forwarder’s Responsibilities? The forwarder relies on the accuracy of the information provided by the USPPI, but is responsible to question any information that might be incomplete or seemingly contradictory to U.S. export regulations. NCBFAA USPPI Responsibility Information Sheet 16

© 2015 Sandler, Travis & Rosenberg, P.A. All rights reserved. Trade Modernization Concepts 17 Legislation (CBP Reauthorization; Mod Act II?) Regulations & Rulings (Issues & Process) Role of the Parties Free Trade Agreements & Preference Programs Trade Facilitation (WTO, CBP, CEEs/Ports) Mutual Recognition: Compliance & Security (Import & Export) Simplified Processes (Entry, Release, Post Entry, Revenue) CBP, PGA Training & Expertise Uniform, Transparent Enforcement (ADD, IPR, PGAs)

© 2015 Sandler, Travis & Rosenberg, P.A. All rights reserved. Real World Example 1: FTAs 18 CBTPA - shirt of short supply fabric was essential character. So, entire set duty free. DR CAFTA - foreign tie over 10% FOB makes entrie set dutiable.

© 2015 Sandler, Travis & Rosenberg, P.A. All rights reserved. Real World Example 2: PGAs 19 Facial cremes contained caviar extract subject to CITES Paperwork did not indicate products contained caviar, so not declared to FWS

© 2015 Sandler, Travis & Rosenberg, P.A. All rights reserved. Real World Example 3: ADD 20 Wooden beds, night stands and dressers from China invoiced as wooden furniture. No ADD claimed at entry. Most items appropriately classified as wooden, bedroom furniture.

© 2015 Sandler, Travis & Rosenberg, P.A. All rights reserved. Lenny Feldman, Esq. Managing Member - Miami Office S ANDLER, T RAVIS & R OSENBERG, P.A QUESTIONS? 21